Hawaii Seeks Additional Funding for Financial System Replacement After $8 Million Contract Fails

Hawaii Seeks Additional Funding for Financial System Replacement After $8 Million Contract Fails

Gov. Josh Green’s administration faces scrutiny and requests more money for a new financial management system after terminating a troubled contract with a vendor.

Hawaii’s state government is seeking additional funding to replace its outdated financial management system, which stalled last year when the state terminated its problematic contract with a vendor. The failed contract with Labyrinth Solutions Inc. cost the state approximately $8 million, prompting the need for a fresh start with a new, larger contract for the modernization project. However, this request for more funding has drawn criticism from lawmakers, who are questioning the state’s ability to manage taxpayer dollars effectively.

A Costly Termination Raises Concerns

The failed project aimed to replace the existing state financial system, FAMIS, with a more advanced system capable of managing various financial data, including accounts payable, budget and finances, travel and expenses, and fixed assets. FAMIS, a decades-old mainframe computer system, has long been a priority for the state government to replace.

Labyrinth Solutions Inc. (LSI) was initially awarded a $16.5 million contract in 2021 to replace the outdated system. However, the company later attempted to renegotiate the terms of the deal, leading to disagreements on the bid specifications. The project’s oversight committee ultimately decided to terminate the contract, citing LSI’s inability to meet cost, schedule, and performance parameters.

Conflicting Accounts and Misunderstandings

State Chief Information Officer Douglas Murdock and Comptroller Keith Regan faced questioning from the Senate Ways and Means Committee regarding the failed contract. Murdock stated that the state hired an outside consultant to track the project’s progress and, when it became clear that LSI could not fulfill the contract requirements, attempted to negotiate a resolution. However, the committee ultimately decided to terminate the contract, resulting in the loss of $8 million.

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Rick Miller, global head of delivery and executive vice president of InvenioLSI, disputed Murdock’s account, stating that the state misunderstood the intent of the request for proposals (RFP) and the contract awarded to LSI. Miller claimed that the state requested price estimates for integrating almost all state agencies, expanding the project’s scope beyond the initial agreement.

Lessons Learned and Moving Forward

Lawmakers expressed concern over the state’s decision-making process and the significant financial loss incurred. Committee Chairman Donovan Dela Cruz questioned why the contract was not terminated earlier, emphasizing the need to prevent further financial losses. Murdock acknowledged that there were discussions about stopping the project but noted that the executive committee opted to try and rectify the issues instead.

To ensure the success of the new contract, Murdock highlighted the establishment of an organizational change management team. This team will focus on providing the necessary support and expertise to facilitate the project’s implementation. Additionally, the proposed administration budget includes $1.6 million for contracts to augment staff, allowing employees in the accounting division to concentrate on the computer modernization project.

Conclusion:

Hawaii’s pursuit of a new financial management system has encountered significant setbacks, including the termination of an $8 million contract with Labyrinth Solutions Inc. The state now seeks additional funding to restart the project, estimating a total cost of $60 million. Lawmakers have expressed skepticism and concern over the state’s ability to manage taxpayer dollars effectively. Moving forward, the state government must address these concerns, provide transparent updates on the project’s progress, and ensure that the new contract is executed efficiently to deliver the much-needed modernization of Hawaii’s financial system.

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